1565831 Ontario Limited v. Klupt, 2007 ONCA 440

DATE: 20070615

DOCKET: C44617

COURT OF APPEAL FOR ONTARIO

DOHERTY, MACPHERSON and CRONK JJ.A.

BETWEEN:

1565831 ONTARIO LIMITED

Plaintiff/Respondent

and

BARRY ALLEN KLUPT

Defendant/Appellant

AND BETWEEN:

BARRY ALLEN KLUPT

Plaintiff by Counterclaim/Appellant

and

1565831 ONTARIO LIMITED and JAIME MARTINEZ

Defendants by Counterclaim/Respondents

Counsel:

Lorne S. Silver for the appellant

Milton A. Davis and Brendan Hughes for the respondent

Heard and orally released: June 11, 2007

On appeal from the judgment of Justice S.E. Greer of the Superior Court of Justice dated November 18, 2005.

ENDORSEMENT

[1] Despite Mr. Silver’s vigorous submissions, we see no basis upon which to interfere with the trial judge’s clear and strong findings underlying her ultimate conclusion that the appellant defrauded the respondent in the purchase of the business.

[2] The damage calculation is somewhat troubling and the record as it relates to damages is not as fulsome as it might be.

[3] Under the authorities, the respondent was entitled to damages equal to:

• the difference between the monies paid by the respondent for the purchase of the business and the actual value of the business at the time of sale; and

• any consequential losses flowing from the fraudulent misrepresentations.

[4] The respondent paid $375,000 for the purchase of the business. According to the evidence of the respondent’s expert, the business was worth $53,000 at the time of sale. The appellant contends that this valuation gives no effect to the cash sales which the trial judge acknowledged occurred while the appellant was operating the business. It is true that the trial judge accepted that there were some cash sales, although she expressly rejected the appellant’s evidence that those sales were a substantial part of the business. The trial judge did not quantify the cash sales. The trial judge implicitly treated the cash sales as an insignificant amount in the valuation of the business. A comparison of the quantum of invoiced sales before the business was sold with the quantum of the total sales after the business was sold justifies the trial judge’s treatment of the cash sales as insignificant. We would not interfere with her determination as to the proper value to be put on the business for the purpose of assessing damages.

[5] The formal order is not entirely clear as it relates to the calculation of damages. It is at least arguable that paras. 1 and 2 represent a double counting of the $115,000 referred to in para. 2. To clarify any uncertainty, we would add the following to para. 2 of the order:

The $115,000 referred to in this paragraph shall be deducted from the quantum of damages awarded in para. 1.

[6] On this record, we see no error in the trial judge’s award of $402,000 as consequential damages flowing from the fraud. The $402,000 represented the amount expended by the respondent in the two years after he purchased the business in an effort to salvage what turned out to be an unviable enterprise. There was uncontested expert evidence indicating that, despite the respondent’s efforts and injections of cash, his efforts to salvage the business were not successful. It was open to the trial judge to find that there was no appreciable benefit to the respondent flowing from the funds he expended in an effort to keep this business afloat. As such, the entire amount was properly viewed as wasted expenses consequential to the fraudulent misrepresentations of the appellant.

[7] We need not describe the proposed fresh evidence in detail. At its highest, the fresh evidence indicates that the respondent is no longer carrying on business at the same location and that he has sold some of the assets of the business. Neither fact could possibly have any effect on either the determination of liability or the damages assessment. The proposed fresh evidence does not meet the test for admissibility of fresh evidence on appeal.

[8] Subject to the small variation in para. 2 of the order described above, the appeal is dismissed.

[9] This appeal took all day to argue and there was an extensive trial record. We are satisfied that the respondent should have his costs of the appeal on a partial indemnity basis. We fix those costs at $30,000, inclusive of disbursements and GST.

“Doherty J.A.”

“J.C. MacPherson J.A.”

“E.A. Cronk J.A.”